ADP 2011 Annual Report Download - page 60

Summarized information about stock options outstanding as of June 30, 2011 is as follows:
In fiscal 2010, the Company issued 1.4 million shares in connection with the final compensatory employee stock purchase plan
offering that vested on December 31, 2009.
The fair value of each stock option issued prior to January 1, 2005 was estimated on the date of grant using a Black
- Scholes option
pricing model. For stock options issued on or after January 1, 2005, the fair value of each stock option was estimated on the date of
grant using a binomial option pricing model. The binomial model considers a range of assumptions related to volatility, risk
- free
interest rate and employee exercise behavior. Expected volatilities utilized in the binomial model are based on a combination of
implied market volatilities, historical volatility of the Company ’ s stock price and other factors. Similarly, the dividend yield is based
on historical experience and expected future changes. The risk
- free rate is derived from the U.S. Treasury yield curve in effect at the
time of grant. The binomial model also incorporates exercise and forfeiture assumptions based on an analysis of historical data. The
expected life of the stock option grant is derived from the output of the binomial model and represents the period of time that options
granted are expected to be outstanding.
The fair value for stock options granted was estimated at the date of grant using the following assumptions:
The weighted average fair values of restricted stock plan issuances were as follows:
B. Pension Plans. The Company has a defined benefit cash balance pension plan covering substantially all U.S. employees, under
which employees are credited with a percentage of base pay plus interest. The plan interest credit rate varies from year
- to - year based
on the ten
- year U.S. Treasury rate. Employees are fully vested upon completion of three years of service. The Company's policy is to
make contributions within the range determined by generally accepted actuarial principles. In addition, the Company has various
retirement plans for its non
- U.S. employees and maintains a Supplemental Officers Retirement Plan (“ SORP ” ). The SORP is a defined
benefit plan pursuant to which the Company pays supplemental pension benefits to certain key officers upon retirement based upon
the officers ’ years of service and compensation.
A June 30 measurement date was used in determining the Company
’ s benefit obligations and fair value of plan assets.
The Company is required to (a) recognize in its statement of financial position an asset for a plan ’ s net overfunded status or a
liability for a plan
’ s net underfunded status, (b) measure a plan ’ s assets and its obligations that determine its funded status as of the
end of the employer
’ s fiscal year, and (c) recognize changes in the funded status of a defined benefit plan in the year in which the
changes occur in accumulated other comprehensive income (loss).
60
Outstanding
Exercisable
Weighted
Weighted
Exercise
Number
Remaining
Average
Number
Remaining
Average
Price
of Options
Life
Price
of Options
Life
Price
Range
(in thousands)
(in years)
(in dollars)
(in thousands)
(in years)
(in dollars)
Under $25
298
1.7
$
17
73
1.4
$
17
$25 to $35
1,587
1.5
$
31
1,531
1.3
$
31
$35 to $45
17,790
3.8
$
40
15,020
3.4
$
40
$45 to $55
2,039
3.8
$
47
1,199
1.3
$
46
21,714
3.6
$
40
17,823
3.0
$
39
Years ended June 30,
2011
2010
2009
Risk - free interest rate
1.4% - 2.4
%
2.3% - 2.6
%
1.8% - 3.1
%
Dividend yield
2.9% - 3.3
%
3.2% - 3.4
%
2.6% - 3.5
%
Weighted average volatility factor
24.5% - 24.9
%
25.9% - 30.4
%
25.3% - 31.3
%
Weighted average expected life (in years)
5.1 - 5.2
5.0 - 5.1
5.0
Fair value
$7.59
$7.05
$7.54
Year ended June 30,
2011
Performance - based restricted stock
$
40.20
Time - based restricted stock
$
44.58